White House Eyes $5.5 Billion Tax Hike on Airline Industry

The Obama administration is pushing for new taxes on the airline industry that would amount to an estimated hike of $14 per flight. But that’s only a drop in the bucket of what the White House proposes, said one industry insider.

“Altogether, the White House budget proposal would increase taxes on airline customers and airlines by a whopping 29 percent, adding another $5.5 billion to their $19 billion annual tax burden,” said Vaughn Jennings, managing director for government and regulatory communications for Airlines for America.

The $14 increase—the first on the White House wish list—is aimed at raising money to reduce the national deficit and hiring thousands of immigration and customs enforcement officers at airline security checkpoints.

Questions Over Spending

Supporters say it is a small price to pay for faster service in security lines, and that excess money would go toward paying for general improvements at the nation’s airports. But detractors say the industry is taxed enough, and moreover, there is a key difference between an airline-initiated fee increase and a government-imposed tax. As one tax analyst posed: Who should rightly pay for airport security and air traffic control?

“If we assume that air travelers should be paying for those things rather than the general public, then airline ticket taxes make sense,” said Richard Morrison, manager of communications for the Tax Foundation. “But there are many questions about whether the FAA and TSA are spending those revenues in a smart, efficient way. In other words, fees for government services make sense, but whether this particular set of increases is a good idea is very much open for debate.”

Congress already shot down a similar White House proposal to raise taxes on the airline industry last year. That’s a good thing, airline industry executives say. Airlines are already hit with high taxes and fees that exceed even those paid by the so-called sin industry, tobacco and alcohol.

20 Percent of Ticket Price

“Taxes and fees amount to about 20 percent of a typical $300 round-trip domestic ticket,” said Gary Kelly, chief executive officer of Southwest Airlines, in a previously penned column that passed the PolitiFact smell test for truth. “That’s higher than taxes on products like alcohol, tobacco and firearms.”

Since 1972, Jennings said, taxes on airlines have almost tripled. Adding another one would swing the pendulum in the wrong direction, he said.

“A strong, healthy, and globally competitive U.S. airline industry is vital for Americans,” he said. “Reducing the tax burden … is critical, as it would help keep airline ticket costs affordable, benefitting U.S. citizens, jobs, and the economy.”